Sustainability-related Disclosure

Product Name: Invincible Investment Corporation

Legal entity identifier: 353800JY6M2692VAV685

Invincible Investment Corporation (hereafter referred to as "INV") promotes environmental and social characteristics, but does not have as its objective a sustainable investment within the meaning of article 9(1) of Regulation (EU) 2019/2088 ("SFDR"). INV has no employees in accordance with the prohibition on having employees under the Act on Investment Trusts and Investment Corporations of Japan, and relies on Consonant Investment Management Co., Ltd. ("Asset Manager"), to manage and operate the properties in our portfolio. INV and the Asset Manager" are hereinafter referred to collectively as "we," "us" or "our." We have no reference benchmark designated for the purposes of attaining the environmental or social characteristics promoted by our investment units. References to "fiscal year" or "FY" are to the 12 months began or beginning April 1 of the year specified in line with the fiscal year of the Asset Manager, unless noted otherwise.

Summary

No sustainable investment objective	The financial products offered by INV promote environmental or social characteristics, but do not have as their objective sustainable investment.
Environmental or social characteristics of the financial product	We recognize the importance of environmental, social, and governance ("ESG") considerations in real estate investment management. With respect to this, we consider economic and social development, contribution to global environmental conservation and achieving sustainability goals as an important part of our management strategy. We have established the policies that promote sustainability based on our belief that the incorporation of ESG considerations into the real estate investment management business, which is our primary business, is essential for maximizing unitholder value over the medium to long term. We implement various environmental or social initiatives, as described below.
Investment strategy	INV invests directly or indirectly through trust beneficiary interests in real estate and real estate-related assets. Therefore, the assessment of good governance practices in relation to investee companies is not applicable to INV. INV, which makes focused investments in hotels and residential properties as core assets, manages its assets with an aim to secure stable growth and profits over the medium and long term. INV also recognizes its social responsibility to the environment and local communities as a J-REIT and therefore proactively implements ESG-friendly investment management and sustainability initiatives that take advantage of our assets' characteristics, as described below. While there is no third-party rating used to assess our governance practices, we, along with the Asset Manager, have introduced various measures to assess and enhance our governance systems, as described below.
Proportion of investments	INV's asset allocation is 100% in real estate and real estate-related assets. As of March 31, 2023, INV has BELS Certification for its 15 hotels, accounting for 23.4% of our properties based on appraisal value on the valuation date of December 31, 2022 and acquisition price of the preferred equity interest in the TMK which holds Sheraton Grande Tokyo Bay Hotel as an underlying asset. In addition, INV has CASBEE Certification for Buildings (Existing Buildings) for its two hotels and Certification for CASBEE for Real Estate for its two residential properties, accounting for 8.3% of our properties.
Monitoring of environmental or social characteristics	In order to measure the attainment of the E/S characteristics we promote, we use the indicators such as (i) acquiring GRESB (defined below) assessment, (ii) setting environmental targets, (iii) conducting tenant satisfaction surveys and (iv) acquiring environmental certifications such as BELS and CASBEE (these are defined below). Each is further described below.
Methodologies	The Asset Manager has established the Sustainability Committee, which generally meets at least four times a year. The Sustainability Committee uses the data of environmental performance to assess progress made against sustainable targets, and decides on necessary action plans in order to implement initiatives continuously and systematically based on our Sustainability Policy. The activity conducted by the Sustainability Committee is reported to all officers and employees of the Asset Manager and INV's board of directors. The Asset Manager uses the methodologies as described below to monitor and track our ESG performance.
Data sources and processing	As further described below, the Asset Manager obtains certain ESG-related data from hotel operators and property management companies. In addition, depending on the type of data, the Asset Manager plans to ensure data accuracy and quality through a third-party organization's external review.
Limitations to methodologies and data	As further described below, the primary limitation to the methodology or data source is the necessity of our reliance on our tenants, hotel operators and property management companies for raw data at the property level. Data at the property level is compiled internally at the Asset Manager, but the data is confirmed by the relevant departments. Limitations to the methodology and data are not expected to affect the attainment of the environmental or social characteristics promoted by INV in any material way.
Due diligence	Prior to our investment in a property, to identify risks and avoid investments in properties that have overly high levels of risk, the Asset Manager conducts a due diligence review of the property, including investigation of soil contamination and toxic substances such as asbestos, Freon gas and polychlorinated biphenyls ("PCB") by obtaining real estate appraisal reports and engineering reports, from real estate appraisers and real estate investigators, in addition to conducting economical, physical and legal assessment.
Engagement policies	Prior to our investment in a property, the Asset Manager conducts due diligence review of the property, including the assessment of compliance with applicable environmental laws and regulations, environmental performance and disaster risks, as well as investigation into hazardous substances and soil contamination by obtaining environmental assessment from third parties. We also do not consider investing in properties that do not meet the standards for soil contamination and other environmental contamination in accordance with the related environmental laws and ordinances. However, from time to time we invest in properties not meeting the standards as long as they are deemed fixable promptly after the investment.
Designated reference benchmark	INV has no benchmark index designated as a reference benchmark to meet the environmental or social characteristics promoted by INV.

No sustainable investment objective

The financial products offered by INV promote environmental or social characteristics, but do not have as their objective sustainable investment.

Environmental or social characteristics of the financial product

We recognize the importance of environmental, social, and governance ("ESG") considerations in real estate investment management. With respect to this, we consider economic and social development, contribution to global environmental conservation and achieving sustainability goals as an important part of our management strategy. We have established the policies that promote sustainability based on our belief that the incorporation of ESG considerations into the real estate investment management business, which is our primary business, is essential for maximizing unitholder value over the medium to long term.

We have implemented various environmental initiatives including the following:

Promotion of energy conservation and reduction of greenhouse gas. We promote energy saving efforts and the reduction of greenhouse gas emissions in managing our investment assets. We have implemented the following initiatives in a part of our properties: Introduction of automatic meter readings, adoption of Building and Energy Management System ("BEMS", which efficiently manages air conditioning systems and lighting), installation of LED lightning, installation of on-site renewable energy in the form of solar power, installation of high-efficiency equipment and appliances, installation of gas generation systems (which utilize otherwise wasted heat to reduce greenhouse gas emissions as compared to the previous power generation systems) and installation of inverters (which help make electrical facilities operate more efficiently). We have established the following targets with respect to energy saving efforts and the reduction of greenhouse gas emissions: 　　
- Target to reduce energy consumption: Reduce energy intensity of our assets we manage as owner by 5% during the period from FY2020 to FY2024 compared to FY2019 levels; and
- Target to reduce greenhouse gas: Reduce emission intensity (scope 1 and scope 2) of our entire portfolio by 5% during the period from FY2020 to FY 2024 compared to FY2019 levels, and reduce emission intensity (scope 3 and aggregate amount of scope 1, scope 2, and scope 3) by 1% during the same period.
Reducing water use. We have implemented the following water saving measures in a part of our properties.: installation of water-saving type toilets and water-saving showers, implementation of wastewater treatment and reuse of rainwater, reclaimed water, and drainage.
Effective utilization of resources and reduction of waste. MyStays Hotel Management Co., Ltd. ("MHM"), the main operator of INV's domestic hotel portfolio, has established a matching system that reuses furniture, fixtures, equipment, tableware, and artwork that are no longer needed at other properties, in order to realize cost reduction and waste reduction.
Education of our hotel assets' operators. We provide our hotel assets' operators with documentation regarding sustainable hotel operations. We conduct such education efforts and cooperate with them in order to decrease the burden on the environment caused by hotel operations and improve hotel users' consciousness about environmental issues.
Including "Green Lease" provisions in our agreements. We have introduced environmental provisions, which we refer to as "Green Lease" provisions, in a part of our leases with our hotel tenants, under which tenants are required to collaborate on environmentally conscious measures and share various environment-related data with us.

We have implemented various social initiatives at our properties, including the following:

Collaboration with tenants, supply chains and local communities. Amid the COVID-19 pandemic, we have made available three of our properties as accommodation and medical facility for patients with mild symptoms or as quarantine facility for returnees from overseas. In addition, we made available meeting rooms at Hotel MyStays Shin Osaka Conference Center as a vaccination venue.
Contribution to disaster prevention. A part of our properties are designated as "Tsunami Evacuation Buildings", which are buildings designated by municipalities in advance as an emergency evacuation site to which local residents can be evacuated temporarily when a Tsunami inundates an area.
Providing support for employees. Employees of the Asset Manager are provided with e-learning content to prepare for qualification exams and to acquire various business skills. Employees can use such content at any time to improve their expertise and skills. The Asset Manager also conducts sustainability-focused training for all its officers and employees at least once a year. The purpose of this training is to help the officers and employees acquire knowledge and raise awareness of sustainability considerations in line with business practices, such as market trends and regulations related to ESG and environmentally friendly real estate.
Benefit programs for the health and well-being of each employee. The Asset Manager has established various benefit programs, listed below, to support the work and lifestyles of our employees.
- Full subsidy for a comprehensive medical checkup (no age restriction)
- Childcare leave (including shortened work hours for childcare) for employees with young children
- Nursing care leave (including shortened work hours for nursing care)
- Leave to care for sick or injured children
- Monetary gifts for congratulations, condolences, etc.
- Cooperation with social services companies
- "Premium Friday" (which means a shorter work day one Friday a month)
- Designating Wednesdays as "no overtime days"
- Off-peak commuting and remote working arrangements in the case of emergencies, such as infectious disease outbreaks
Respect for human rights and promotion of diversity. The Asset Manager acknowledges and accepts differences in each employee's ability and values and pays respect to heterogeneity in order to maximize the abilities of each employee. We aspire to achieve sustainable corporate growth creating additional value. Our compliance regulations clearly prohibit each kind of discrimination and sexual harassment, and we strive to foster a corporate culture that respects each personality. We also promote the active participation of women by a creating work environment and systems that are comfortable for women.
Whistleblowing system. The Asset Manager has established whistleblower protection rules that allow its officers and employees (including temporary employees) to report or consult about potential harassment, fraud or other inappropriate acts. In accordance with the Whistleblower Protection Act of Japan, the rules protect whistleblowers by prohibiting inappropriate treatment upon whistleblowing, allowing anonymous reports and keeping whistleblowers' reports confidential, and stipulate procedures to find and correct reported acts, including investigation and disciplinary actions for those who are found to have engaged in inappropriate behavior. In addition to using an in-house contact system, a whistleblower may consult an outside attorney who has no business relationship with the Asset Manager.
Regular performance appraisals and feedback processes. All of the Asset Manager's employees set an annual performance goal following an interview with their supervisor at the beginning of each fiscal year. We conduct personnel evaluations at the end of each fiscal year after an interview with all employees to look back on their performance and provide feedback on the evaluation results. Such results are reflected in each employee's compensation. We have established a transparent personnel evaluation system through regular measurement and feedback processes.
Promotion of local consumption of locally produced foods. One of our properties, Hotel Epinard Nasu, has a restaurant that offers food made with locally sourced ingredients. In this way, we support local agriculture and promote education regarding food.

Investment strategy

INV invests directly or indirectly through trust beneficiary interests in real estate and real estate-related assets. Therefore, the assessment of good governance practices in relation to investee companies is not applicable to INV.

INV, which makes focused investments in hotels and residential properties as core assets, manages its assets with an aim to secure stable growth and profits over the medium and long term. INV also recognizes its social responsibility to the environment and local communities as a J-REIT and therefore proactively implements ESG-friendly investment management and sustainability initiatives that take advantage of our assets' characteristics, such as providing our properties for use by patients with mild cases and people who have recently returned from abroad as a countermeasure against the spread of COVID-19 infections and carry out social contribution activities such as voluntary cleanup on roads and rivers.

While there is no third-party rating used to assess our governance practices, we, along with the Asset Manager, have introduced the following measures to assess and enhance our governance systems:

Related-party transactions. When INV conducts certain transactions such as asset acquisition from sponsor related parties, prior approvals by the Board of Directors of INV are required to ensure an objectivity in deliberation regarding conflicts of interests. In such agenda, only two supervisory directors (a lawyer and a certified public accountant) will participate in the vote, and the executive director who concurrently serves as the representative director of the Asset Manager will not participate in the vote as he is a related-party.
Risk management. The Asset Manager has established a risk management manual for the purpose of ensung stable management and performing appropriate risk management as a financial instruments business operator. In addition, the Asset Manager's Board of Directors has established a risk management policy and procedures to monitor and supervise the development of an appropriate risk management system.
Internal audit system. The Asset Manager conducts annual internal audits at least once a year, in order to evaluate its risk management. Once the internal audit is completed, the Compliance Officer, who serves as the chief controller of internal audit, reports the audit results to the representative director of the Asset Manager, Compliance Committee and the audited departments. The Compliance Officer also reports to the Board of Directors of the Asset Manager as necessary. The Compliance Officer reports the progress made on matters for improvement indicated by internal audits. Verification of the status of improvement will be conducted subsequent to on-site audits.

Proportion of investments

INV's asset allocation is 100% in real estate and real estate-related assets. As of March 31, 2023, INV has BELS Certification for its 15 hotels, accounting for 23.4% of our properties based on appraisal value on the valuation date of December 31, 2022 and acquisition price of the preferred equity interest in the TMK which holds Sheraton Grande Tokyo Bay Hotel as an underlying asset. In addition, INV has CASBEE Certification for Buildings (Existing Buildings) for its two hotels and Certification for CASBEE for Real Estate for its two residential properties, accounting for 8.3% of our properties.

Monitoring of environmental or social characteristics

We use the following indicators to measure the attainment of the E/S characteristics we promote.

GRESB Assessment. The GRESB is an annual benchmarking assessment to measure ESG integration of real estate companies and funds. It was founded in 2009 by a group of major European pension funds who played leading roles in launching Principles for Responsible Investment ("PRI"). The GRESB Real Estate Assessment is characterized by evaluating sustainability initiatives of real estate companies, REITs, and real estate funds, rather than targeting individual real estate. In the 2022 GRESB Real Estate Assessment, INV received the "2-Star" GRESB Rating, which is based on overall GRESB scores and its quintile position among participants. INV was also awarded the "Green Star" designation for the second consecutive year by achieving high performance in both the "Management Component" that evaluates policies and organizational structure for ESG promotion, and the "Performance Component" that assesses environmental performance and tenant engagement of properties owned. Furthermore, INV was highly evaluated for its ESG information disclosure efforts and received, for the second consecutive year, the "A Level", which is the highest level for GRESB Public Disclosure assessing ESG information disclosure performance.
Environmental targets. The Asset Manager has formulated an "Energy Conservation Policy", "Greenhouse Gas Emissions Reduction Policy", "Water Saving Policy" and "Waste Management Policy", which stipulate initiatives to reduce environmental impact caused by real estate investment management operations. Through the cycle of planning, implementation, performance management, and improvement set forth in an "Environmental Management System Operation Manual" that stipulates the details for operating these policies, the Asset Manager strives to continuously reduce the environmental impact. The Asset Manager has specific targets as stated above under "Promotion of energy conservation and reduction of greenhouse gas."
Tenant Satisfaction Survey. The Asset Manager conducted a satisfaction survey for all residents of our residential properties (excluding three residences for students with fixed-rent subleases) in March 2022 through an external research organization. We continuously collect opinions and requests of residents and share them with property management companies to improve building/equipment specifications and services.
Building-housing Energy-efficiency Labeling System ("BELS") Certification. The BELS system was created for the purpose of implementing accurate evaluation and labeling of nonresidential buildings' energy-efficiency performance by third-party organizations based on the evaluation guidelines for energy-efficiency labeling for non-residential buildings issued by the Ministry of Land, Infrastructure, Transport and Tourism of Japan in October 2013.
Comprehensive Assessment System for Built Environment Efficiency ("CASBEE"). CASBEE is a method that comprehensively assesses the quality of a building, and evaluates features such as interior comfort and scenic aesthetics, in consideration of environment practices including use of materials and equipment that save energy or achieve smaller environmental loads.

Methodologies

The Asset Manager has established the Sustainability Committee, which generally meets at least four times a year. The Sustainability Committee uses the data of environmental performance to assess progress made against sustainable targets, and decides on necessary action plans in order to implement initiatives continuously and systematically based on our Sustainability Policy. The activity conducted by the Sustainability Committee is reported to all officers and employees of the Asset Manager and INV's board of directors.

GRESB Real Estate Assessment. The Sustainability Committee receives and confirms reports regarding initiatives to obtain GRESB assessment and the progress of the same. Such reports are made by our asset management department and planning department. After investing in properties, we take initiatives such as making capital investment to obtain environmental certifications and reduce environmental burdens and conducting interview for hotel operators regarding the status of their social contribution activities, etc.
Environmental targets. The Sustainability Committee receives and confirms reports regarding environmental data such as waste amount and consumption of electricity, gas, fuel and water. Such reports are made by our asset management department after receiving information from hotel operators (for hotel properties) and property management companies (for residential properties). Each type of environmental data is collected monthly. Our asset management department works to ensure the accuracy of the environmental data we collect. Also, in the future we plan to obtain external review by a third-party organization to ensure the accuracy of the environmental data we collect.
Tenant Satisfaction Survey. Our asset management department prepares questions for tenant satisfaction surveys in cooperation with a third-party organization and property management companies distribute and collect survey questionnaires. The survey results are reported to our asset management department by a third-party organization and our asset management department shares such results with property management companies in order to consider and conduct improvement measues. Various matters such as survey results, the rate of tenants' responses and improvement measures are reported to the Sustainability Committee by our asset management department.
Building-housing Energy-efficiency Labeling System ("BELS") Certification. The Sustainability Committee receives and confirms reports regarding a list of properties that plan to obtain BELS Certification, BELS related expenses, the status of applications and when we expect to obtain BELS Certification. Such reports are made by our asset management department for almost all meetings of the Sustainability Committee. After investing in properties, we take various initiatives, such as making capital investment, in order to reduce energy consumption.

Data sources and processing

We use the following data sources:

GRESB Real Estate Assessment. Our asset management department and planning department collect the relevant data and report it to the Sustainability Committee.
Environmental targets. Our asset management department receives information from hotel operators and property management companies that collect the relevant data every month, and reports it to the Sustainability Committee. Environmental data in our portfolio such as waste amount and consumption of electricity, gas, fuel and water are tracked and monitored internally. We also plan to ensure the accuracy of the data through a third-party organization's external review.
Tenant Satisfaction Survey. In order to ensure the accuracy of the survey results, the survey results are collected by third-party organizations and reported to our asset management department. The tenant satisfaction status in our portfolio is tracked and monitored internally.
Building-housing Energy-efficiency Labeling System ("BELS") Certification. Our asset management department collects the relevant data and reports it to the Sustainability Committee. The proportion of the properties that have obtained BELS Certification in our portfolio based on gross floor area is calculated and tracked internally.

Limitations to methodologies and data

The primary limitation to the methodology or data source is the necessity of our reliance on our tenants, hotel operators and property management companies for raw data at the property level. Like many other real estate investment corporations and asset managers, we rely on raw data provided by our tenants, hotel operators and property management companies, and independent verification of accuracy of such raw data provided by the tenants and property management companies presents challenges. In addition, environmental data disclosures are generally updated on an annual basis. Accordingly, the data will therefore not always be fully up to date.

Data at the property level is compiled internally at the Asset Manager, but the data is confirmed by the relevant departments.

Limitations to the methodology and data are not expected to affect the attainment of the environmental or social characteristics promoted by INV in any material way.

Due diligence

Prior to our investment in a property, to identify risks and avoid investments in properties that have overly high levels of risk, the Asset Manager conducts a due diligence review of the property, including investigation of soil contamination and toxic substances such as asbestos, Freon gas and polychlorinated biphenyls ("PCB") by obtaining real estate appraisal reports and engineering reports, from real estate appraisers and real estate investigators, in addition to conducting economical, physical and legal assessment. For overseas property, INV complies with laws and regulations regarding the environment and geology in the country or region where properties are located and makes a comprehensive judgment on whether or not to invest, taking into account real estate market trends based on political and economic conditions, the practices in the region and various risks in various fields such as legal affairs, accounting, taxation, foreign exchange, and socio-economic conditions.

Engagement policies

Prior to our investment in a property, the Asset Manager conducts due diligence review of the property, including the assessment of compliance with applicable environmental laws and regulations, environmental performance and disaster risks, as well as investigation into hazardous substances and soil contamination by obtaining environmental assessment from third parties. We also do not consider investing in properties that do not meet the standards for soil contamination and other environmental contamination in accordance with the related environmental laws and ordinances. However, from time to time we invest in properties not meeting the standards as long as they are deemed fixable promptly after the investment.

Designated reference benchmark

INV has no benchmark index designated as a reference benchmark to meet the environmental or social characteristics promoted by INV.

INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISIONS, AND THE IMPACT OF SUCH RISKS ON THE RETURNS OF INV (SFDR ARTICLE 6 DISCLOSURE)

INV and the Asset Manager address sustainability risks by taking into account environmental, social and governance, or ESG, factors in our investment decision process and on a continuous basis.

The Asset Manager tracks and monitors the property-level environmental performance indicators of our properties to assess the environmental performance of our portfolio appropriately. The Asset Manager's Sustainability Committee, which generally meets at least four times a year, uses the data of environmental performance to assess progress made against sustainable targets, and decides on necessary action plans in order to implement initiatives continuously and systematically based on our Sustainability Policy. The Sustainability Committee consists of (i) the President and CEO, who is the final decision-maker, (ii) the general manager of the Asset Management Department and the general manager of the Planning Department, who are responsible for executing sustainability initiatives, and (iii) officers and employees that engage in promoting sustainability.

Under this organizational structure, we have instituted a number of initiatives, at both the portfolio level and individual property level, to promote E/S characteristics. Such initiatives include climate change initiatives, initiatives for saving/reducing energy consumption, local community initiatives, and initiatives for employees/tenants.

In order to conduct sustainable asset management while maximizing the value of our properties, we have considered ESG factors in our investment and asset management processes. Our Sustainability Policy expressly states that we consider the environment and stakeholders such as tenants, supplier and local communities, and we request our hotel tenants to cooperate with our sustainability initiatives. We consider environmental and social factors when procuring products and services.

While sustainability issues will severely impact our business activities, we believe that such issues may also become potential business opportunities to create new value for sustainable growth. Accordingly, we position our commitment to sustainability as one of the top priorities in our management strategies. We also believe that integrating sustainability factors alongside traditional financial and operational metrics in our investment decision process helps us make a more holistic assessment of a property's risks and opportunities and is commensurate with the pursuit of superior risk-adjusted returns. In other words, we believe that if we fail to consider ESG factors enough in the investment decision-making process, it may cause the increase of capital cost and even reduce investors' returns. If our ESG initiatives are not sufficient, our investment units may be excluded from investment by investors who use the status of ESG initiatives as one of their investment criteria. As a result, the investment unit price may be adversely affected. We are exposed to the following risks in particular.

Physical risks

The assets in which we invest are exposed to earthquake, flood and storm risks because some of our properties are located in areas that are sensitive to their impact. If a significant earthquake, flood or storm hits any of our properties, it will likely have a negative effect on its value. This may include physical damage to the properties and tenants' premises. In order to secure stable growth of investment assets and stable profits over the medium and long term, INV aims to construct a portfolio of geographically diverse investment assets by avoiding concentrated investment in certain areas to mitigate earthquake and other risks.

Reputation and fund raising risks

We are exposed to the risk of funds being available only at less advantageous terms due to stricter ESG requirements on portfolio composition and other factors, as well as the risk of reputational decline if INV's measures on climate-related issues are perceived negatively by investors or the general public. We fulfill our accountability for stakeholders by actively disclosing ESG related information. We also consider the use of external evaluations and third-party certification to visualize the results of our environmental and social initiatives.